Good morning, and welcome to the CLEAR fourth quarter 2021 earnings conference call. We have with us Ms. Caryn Seidman-Becker, Co-founder, Chairman, and Chief Executive Officer, and Ken Cornick, Co-founder, President, and Chief Financial Officer. Please be advised that today's conference is being recorded. I would also like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find factors that could cause the company's actual results to differ materially from these projections in our most recent SEC filings. In addition, we've included some non-GAAP financial measures in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's 8-K. With that, I'll turn the call over to Caryn Seidman-Becker, Co-founder, Chairman, and Chief Executive Officer of CLEAR. Caryn.
Thank you. Good morning, and thank you for joining us. Earlier today, we released a shareholder letter along with our 2021 fourth quarter and year-end financials on our website. I hope you all have had an opportunity to review them. I will make some brief comments and then turn it over to Ken for some details on the financials. CLEAR's mission has always been to make experiences safer and easier. For over a decade, we have powered frictionless and trusted journeys in the travel space by connecting you to all the things that make you. Pent-up demand and a return to normalcy in the wake of the Omicron variant is leading to a surge in travel.
We have been bullish on the rebound of the CLEAR Plus business as the passion for travel and exploration was a global secular trend before COVID, and after months of lockdown, consumers are more eager than ever to experience the world. We saw this during the holiday travel season, when we recorded our highest CLEAR Plus enrollment and usage numbers for any quarter ever. The World Travel & Tourism Council projects the sector will outpace pre-pandemic levels in 2022, up more than 6% since 2019. With our obsession for frictionless experiences, CLEAR is well-positioned to make the return to the skies more seamless than ever. New products to extend the Home to Gate journey and drive enhanced predictability, traveler control, and consumer choice are prized at CLEAR.
Our mobile Home to Gate feature, expanding CLEAR Plus lanes, new RESERVE lanes, and the upcoming launch of our PreCheck enrollment services are great examples of the innovation and consistent enhancements travelers should expect to see from CLEAR. Additionally, adding Whyline to our portfolio and their virtual queuing technology extends our capabilities and helps enable our expansion both domestically and internationally. Our secure identity platform extends the CLEAR frictionless journey beyond travel, enabling safer and easier experiences, both physically and digitally, and turning CLEAR into a daily habit. The new convenience economy, where so much can be done at the push of a button, has now expanded to physical settings. Whether it's age verification at a Raiders game, virtually queuing at Banco Macro in Argentina, or confirming professional licenses and certifications, this omni-channel demand from both consumers and partners is accelerating the CLEAR flywheel.
From day one, CLEAR has always been committed to privacy done right, and never has this been more important. It is embedded in the culture, processes, and business model of our company. Privacy, protecting member data, and security are at the center of everything we do, and we have never wavered from that commitment. CLEAR is opt-in, and members are always in control of their information. None of this would be possible without our world-class team. Together, as owner-operators, we are building for the long term. We are proud of what we have accomplished in 2021 and off to a strong start this year. I would now like to turn the call over to Ken.
Thanks, Caryn. Good morning, everyone. Our financial performance was better than we expected, driven by the growth in CLEAR Plus as well as on the platform side. Omicron had little impact on our CLEAR Plus performance in the quarter. In fact, we had a very strong finish to the year despite the case surge. As we've continued to communicate, our GAAP metrics tend to be a lagging indicator of the underlying strength of our business when we are growing. In 2021, while our bookings re-accelerated, our revenues lagged behind, depressing our GAAP metrics. This is evident as the positive free cash flow reported for the quarter and fiscal year far exceeds the negative reported adjusted EBITDA by a wide margin. We generated significant free cash flow of $26 million in the fourth quarter and $42 million on a full year basis.
2021 marks the fourth consecutive year we have generated positive free cash flow, and we fully expect 2022 to be the fifth. We have a powerful economic model, which was masked in 2021 as we normalized airport staffing towards pre-pandemic levels. The largest component of airport OpEx is cost of direct salaries and benefits. Direct salaries grew 140% in Q4 versus a depressed 2020 comparison. This does not reflect the true operating leverage inherent in the CLEAR Plus business. When compared to more normalized pre-COVID levels, we realized significant operating leverage.
The 33 airports that were open for the entire fourth quarter of 2019 grew same-store bookings in excess of 50% in Q4 2021 versus Q4 2019, while total airport operating expenses grew around 15% in that same period, despite wage inflation in 2020 and 2021. Verifications in those markets were down low single digits%, while enrollments were up over 50%. Timing of new airport launches will affect the quarterly cadence. We expect growth in direct salaries to moderate in 2022, particularly in the back half when we anniversary the beginning of 2021's travel recovery. I also wanna touch on G&A. As a newly public company, year-over-year growth in G&A was elevated in the back half of 2021. Sequentially, on a cash basis, excluding stock comp and acquisition-related expenses of $1.4 million, G&A grew 16%.
Two of the drivers of this growth are credit card fees and upfront enrollment expenses, which are directly attributable to booking strength and member growth. In the non-variable portion of G&A, we had a number of elevated expenses in the quarter, including professional fees, which we expect to either decline or not recur. We expect Q1 2022 G&A to be flat to down sequentially from Q4 levels. Our cash and equivalents balance at 12/31 was $644 million. This reflects positive free cash flow generation and includes the all-cash acquisitions of Whyline and Atlas Certified for a combined approximately $76 million. Whyline and Atlas Certified will contribute to bookings and revenue on the platform side in 2022, and you should think about them as roughly breakeven on a cash basis. Before we go to Q&A, I'll briefly touch on Q1 guidance.
We expect GAAP revenues of $88 million-$89 million and total bookings of $103.5 million-$104.5 million, excluding any contribution from TSA PreCheck. We expect our operationally ready system to be reviewed in the coming weeks, which would then initiate the launch timeline, setting us up for a launch in the next several months. Consistent with historical patterns, we expect Q1 revenue to represent the lowest revenue quarter of fiscal 2022. As stated in the financial discussion in our release, we expect a moderating growth rate in expenses in 2022, and therefore expect margin expansion as well as meaningful free cash flow generation. Now we'll go to Q&A.
Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we ask that you each keep to one question and rejoin the queue for additional questions. Thank you. Our first question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.
Good morning, everyone. Nice to see the progress. Just on a macro basis, the impact of rising gasoline prices and thoughts on travel, anything that you're seeing there, and the reactivation of existing CLEAR members, where do you think you are on that journey to capturing them all back? How fast are they coming back, and what are you seeing there? Just lastly, any pricing adjustments on the membership that you anticipate this year? Thank you.
Thanks, Dana. I'll take the macro travel and win-back question, and then I'll turn pricing over to Ken. We are very bullish on travel, have been, and see very encouraging signs of travel returning from our own data, as well as the companies that we're looking at out there. You're seeing travel agents, hotel operators, restaurants reporting spikes in demand. Online booking companies predicting that the summer 2022 will be the busiest travel season ever. Airlines, you know, some of them saying they're approaching 100% recovery in leisure travel. You know, we are not seeing any kind of slowdown in travel due to gas prices and things of that nature. Probably also because we still have a low percentage share of total travel. We think that there's enormous opportunities for us as people are so focused on, you know, frictionless experiences.
I think they're coming back to travel with higher expectations than they left. It's more difficult to travel in a post-pandemic environment. I think CLEAR is more important than ever. Inflation and rising gas prices do not temper our enthusiasm for travel. In terms of win-backs, you know, net retention does include win-backs, and I do think it speaks to the passion for the brand and the continued product market fit. People who left CLEAR during the pandemic, and there was absolutely more than normal, are coming back to CLEAR. A lot of this happens at the airport, so it's a zero-cost, 3.5-second win-back experience.
You know, I still think that there's a ways to go, not only for people who left during the pandemic, but also as we grow our network and our use cases. There's you know more reasons to come back to CLEAR for people who left pre-pandemic. I still think that we have a ways to go, but clearly we have done a good job of people coming back to CLEAR. But I can't give you an exact number. I think it's not only we have a ways to go in the pandemic number, but also in those who left before as we continue to expand our network and use cases.
Just quickly on pricing, Dana. As you know, we haven't changed our standard price since launching with two airports in 2010. We do think we have pricing opportunities. We're always looking at that. We did take price on family starting in July of last year from $50-$60. We do think we have opportunities for pricing. Nothing to announce at this point.
Got it. One follow-up. How is American Express going? Any progress report on the sign-ups and usage of what you're seeing?
On a macro level, we absolutely love our partnership with American Express. There's obviously a large overlap with Amex and CLEAR customers. In terms of exact penetration numbers, I think that question may be better asked to Amex. What I can say is that the lifetime value of an Amex customer is equal to, if not greater than a customer who comes through our other channels, and certainly LTV to CAC is favorable. I think, you know, American Express is seeing their own growth in members. Not only, again, do you have, you know, a growing member base, but then growing penetration, but off to a very strong start there. Well, no longer really a start. We're nine months in. It continues to be strong.
Thank you.
Thank you. Our next question comes from the line of Paul Chung with J.P. Morgan. Please proceed with your question.
Hi. Thanks for taking my questions. Just on net retention number, you know, which is now above, you know, kind of pre-COVID levels, where do you expect retention to normalize and, you know, how are you driving such high levels today? Very nice execution there.
Thanks. As Caryn just mentioned, you know, we do think that it speaks to the product market fit and the brand affinity. We talk about the excess, you know, the excess win back from excess churn from COVID. We do have a ways to go there. I think, you know, we're not giving specific guidance on the number, but we do think that the net number, you know, settles in somewhere in the high eighties, probably.
Okay. As we kinda think about the platform, you know, sign-ups beyond the pandemic and kinda use of maybe Health Pass engagement comes down a bit, can you expand on strategies to, you know, kinda drive further adoption on the platform, any partnerships in the pipeline with large enterprises, maybe other credit card companies and any other verticals would be helpful. You mentioned the Raiders example, which was helpful. Thank you.
Yeah. Health Pass is an important product in our platform, and it has been so important to introduce, right, new members to the brand and as well as partners. It has definitely, you know, helped make people's experience safer and easier, communities come back better, getting people back to what they love and businesses opening as well. I think what that's really done is help us be a trusted solution to partners. You will see Health Pass evolve as CLEAR and partner with, you know, partners and add products and capabilities to continue to fuel the frictionless experience. We're not gonna announce products before they are readily available, but I think you can see that we are spending on innovation. Things like Home to Gate and the Uber integration, right?
That is the beginning of continuing to pull that experience from a travel perspective from the time you leave your house as opposed to when you show up at the airport, you'll see more in that travel ribbon. You know, sports and entertainment and events, connecting you to all the things that make you you. We did Health Pass at CES this year, but you can imagine that there's a lot of other opportunities to connect you to different things that you were waiting in line for or had to show physical or digital cards for at conferences and events. You'll continue to see that.
I think what's been really important, right, from a doubling of the member base and a continued growth and the ability to enroll in a mobile platform, is that it really allows us to innovate much faster to a much broader base.
Great. Thank you.
Thank you. Our next question comes from the line of Michael Turrin with Wells Fargo Securities. Please proceed with your question.
Hey there. Thanks. Good morning. The Q4 free cash flow number came in well above our estimates. Is there, Ken, anything you can add on just what's driving the second half strength and appreciating there are just some moving pieces with expenses near term? Anything else you can say just on what kind of steady state free cash flow margin this business is capable of delivering as you scale?
Well, I think we've continued to emphasize the fact that the GAAP metrics understate the true strength of the business, and I think the operating cash flow and the free cash flow certainly are more representative of the quality of the business, and the fundamentals that we're seeing. You know, I think generally speaking, we're driving for member growth, bookings and free cash flow. That's how we view the business and judge the business. I think we're not gonna give specific margin guidance on free cash flow, but it is a high-quality business with good free cash flow conversion, low capital intensity. We're very pleased.
I think I would just add to that I think, you know, part of the free cash flow is also starting to see the flywheel at work, right? So we have multiple efficient channels to add members both physically and digitally, so you don't have to spend in marketing the way other companies might. When, again, you think of the cost per gross add and the lifetime value of a customer, I think that is a strong driver of free cash flow. The more we build our brand, the more use cases there are and the more capabilities on the platform, there's multiple ways for people to enroll.
Okay. Just a quick follow-up, if I may. On the Raiders partnership, is there anything you can add around the business model? Is there anything there where you're able to eventually capture something on either the payment side or somewhere else that can contribute to the model?
We do believe transaction fees are an opportunity for CLEAR.
Thank you.
Thank you. Our next question comes from the line of Brian Essex with Goldman Sachs. Please proceed with your question.
Great. Thank you very much for taking the question. I was wondering maybe if I could start with cumulative enrollments. Is there any way to get a sense of B2B versus B2C contribution in that number, at least for the incremental enrollments? How are you thinking about booking seasonality through the rest of the year? I think the release noted that Q1 was a trough. Is Q1 also a trough for bookings as well, just so we get a sense of, you know, your expectations for the year.
Okay. Just on the first question, look, we operate the business as a platform and, you know, as you can see from the Jane example in our letter, the businesses and the customer experience are very much interwoven. We're, you know, not breaking out the specific drivers within the cumulative enrollment number. Look, we're owner-operators who've been making discrete investments in the platform for several years to perpetuate that flywheel that Caryn just mentioned. You're beginning to see the fruits of those investments in member growth and bookings and free cash flow. We're not breaking those out. Your second question?
Booking seasonality, you know, will Q1 be a trough as well, and how to anticipate, you know, the cadence of seasonality through the year?
We're not gonna comment specifically on the bookings piece. We're gonna leave it with the revenue being the lowest revenue quarter of the year.
Maybe a quick follow-up on TSA. Any sense of what milestones are left and the level of confidence that you have that would kind of materialize in the near term?
Yeah, I would say that, you know, our system is operationally ready. As we mentioned in the guidance, in the next few weeks, the review process will start, which will kick off the, you know, the launch process. Next few months, next several months is what we're saying.
I think everyone is involved. Yeah, everyone involved is very motivated to bring this to the traveling public. We are working, you know, actively with TSA. We have a lot of confidence in our system and our operational readiness.
All right. That's real helpful. It makes a lot of sense. Thanks.
Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star one on your telephone keypad. Our next question comes from the line of Ananda Baruah with Loop Capital Markets. Please proceed with your question.
Hey, good morning, guys, and thanks for taking the question. I guess just on structural, I guess 22 drivers for 2022, guys. Last quarter, you talked about the key ones being structural travel growth is the obvious one. Sounds like you're seeing stronger than anticipated probably there. Then you talked about new airports, new customer acquisition, new products, you know, et cetera. Caryn, you actually mentioned international in your prepared remarks. Just would love to get a sense of how you see entering the year now on those key drivers for 22. Then, Caryn, is there anything, you know, kind of incremental that we should be aware about on the international front? That's it for me. Thanks.
Yeah. I'll start with the international piece. Whyline really accelerates our entry. It puts us squarely in Latin America and brings CLEAR to Brazil, Argentina, and Mexico on the enterprise side or the B2B side. It is also creating opportunities to accelerate the conversations on the travel side and the airport side. We are excited on both sides of our business, on both the aviation and on the platform side, to have good international growth this year, granted that's off a base of zero. You know, we're excited about international. We're very excited about Latin America. Not only do we have a team of engineers now, a great team in Argentina, so boots on the ground, partnerships and brands and products.
We're very excited to bring it to both sides of our what we call our dual growth engines. In terms of this year, I think you hit on a lot of it. On the travel side, it is about network expansion, which you will see this year. It is about new products, which you will see this year. We do have a philosophy of not announcing the products before they are live. But if you haven't downloaded the CLEAR App and used Home to Gate and ordered your Uber through it's magical, and I encourage you to do it. You will see, you know, we're working on new partners, not only again, we think of travel more broadly, not only in the airport, but beyond the airport.
On the platform side of the business, we have been investing for new products that will help fuel partnerships and use cases that you will see this year. Again, metrics that we think are important to be judged on, that we're judging ourselves on, are member growth, bookings, free cash flow, and then also, you know, watch for product announcements and partnership announcements.
Do you feel you're on track for the key initiatives across that ecosystem that you just mentioned?
We do, but I also have a philosophy of whatever we did yesterday isn't good enough. You know, I think we can always be doing better, but we are on track. I'm looking for us to exceed every target that we have.
Awesome. Thank you.
Thank you. This concludes our Q&A session and thus concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.